New Round of GSE Reform Bills Unveiled

May 19, 2011 (Chris Moore)

A new round of seven reform bills have been unveiled by House Financial Services Committee Republicans meant to continue the reform of Government Sponsored Enterprises (GSE) Fannie Mae and Freddie Mac. This is on top of the eight bills passed by the Republican controlled House of Representatives that have not and probably will not be taken up by the Democratic controlled Senate.

Rep. Scott Garrett (R-NJ), Chairman of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, stated, “Republicans and Democrats in Congress, as well as the Obama administration, all agree that the current trajectory of Fannie Mae and Freddie Mac is unsustainable. We can no longer afford to sit back and allow the ongoing bailout of these failed institutions to continue. While special interest groups and the guardians of the status quo may not want to admit it, Fannie and Freddie’s days are numbered. It’s not a matter of if, but when – the quicker we begin the process of dismantling them the better off we’ll be.”

“Building on the momentum and success of the first round of bills, we are introducing these seven bills to continue with our efforts to end the bailout, protect taxpayers and get private capital off the sidelines. These seven bills were carefully designed to tie the hands of Fannie and Freddie so that they are no longer a drag on the American taxpayers, a threat to our economic security, and an impediment to private market growth and development.”

Here is a brief description of the bills to be introduced:

– Rep. Don Manzullo (R-IL) is the lead sponsor of legislation to prevent the Treasury Department from lowering the 10% dividend payment Fannie Mae and Freddie Mac pay to American taxpayers. This will ensure that the two entities continue to repay their debt to the taxpayers and that their ongoing bailout moves towards conclusion.

– Rep. Jason Chaffetz (R-UT) has introduced H.R. 463, the Fannie Mae and Freddie Mac Transparency Act of 2011, which would apply the freedom of Information Act (FOIA) to Fannie Mae and Freddie Mac while the entities are in conservatorship or receivership.

– Rep. Robert Hurt (R-VA) is the lead sponsor of legislation to require Fannie Mae and Freddie Mac to dispose of all non-mission critical assets.

– Rep. Michael Fitzpatrick (R-PA) is the lead sponsor of legislation to set a total dollar cap for the amount of money to be used for the bailout of Fannie Mae and Freddie Mac.

– Rep. Steve Stivers (R-OH) is the lead sponsor of legislation to ensure that new quasi-governmental replicas are not crated to replace Fannie Mae and Freddie Mac.

– Rep. Randy Neugebauer (R-TX), Chairman of the Financial Services Subcommittee on Oversight and Investigations, is the lead sponsor of legislation to prohibit taxpayer funding of Fannie Mae and Freddie Mac employee legal fees.

– Rep. Ed Royce (R-CA) is the lead sponsor of legislation to abolish the Affordable Housing Trust Fund.

House Republican GSE reform proposals now have a competing proposal as Congressman John Campbell (R-CA) and Congressman Gary Peters (D-MI) put forward a bill that would essentially create 5 new government agencies, which would require “low-level” government backed guarantees, instead of the 2 we currently have.

The proposal is similar to the one presented by the Mortgage Bankers Association 22 months ago. But for me, it all sounds a lot like the arguments we heard back in the 1970’s when Freddie Mac and Fannie Mae were created. Look where that got us.